China’s new revolutionary?

THE age of revolution is not over, at least not in China. At the five-yearly congress of its Communist Party that opens in Beijing on September 12th, China's party boss, Jiang Zemin, will lay out his manifesto for China's economy in the 21st century. After years of high growth and even faster-rising expectations, the economy now needs another big overhaul if China's fifth of humanity is to prosper. But as the economy changes, so must its politics. What will soon be one of the world's largest economies is on the verge of a third revolution, more complex than Mao's self-preserving turmoil, more far-reaching than Deng's economic modernisations.

Success is far from guaranteed. Mr Jiang and the small band of mostly oldish men who run China look ill-cast as modern revolutionaries. And the economic challenge is daunting. Deng's reforms liberated millions to earn a decent living and some of them to become filthy rich. Yet those in the countryside can still only profit from the land, not own it outright. China's richer coastal provinces look outward to overseas markets and investments, rather than to Beijing. Yet China's state-owned enterprises still account for around two-fifths of industrial output and soak up four-fifths of investment, blocking opportunities for more productive companies to create wealth and jobs (see article). In many ways China remains a collectivist nightmare. Nine out of ten Communists at party headquarters tell you it must stay that way.

On the eve of the congress Mr Jiang was preparing a bold stroke. He recently stole a phrase from his disgraced liberal predecessor, Zhao Ziyang, explaining that China is still in the “primary stages of socialism”. That arcane phrase gives Mr Jiang new scope to use capitalist means for his party's “socialist” ends. It seems likely, at the very least, that he will announce that the 100,000 or so smallest of China's state-owned enterprises will be cast loose on the market and, though the word will not be used, privatised. That would bring China another step closer to capitalism.

Some Chinese economists expect that before long Mr Jiang will go much further—casting off the remaining 1,000 giant firms that account for the bulk of state output and a huge part of its losses. That would need a boldness of spirit that Mr Jiang has hitherto disguised. Such a move, if it were not to lead to great unrest, would need a safety-net of pensions and social-security payments to catch the millions bound to lose their jobs. Some officials talk of building China's biggest state companies into South Korean-style chaebol—but that could be a costly mistake, especially in view of the difficulties that now beset the originals.

Reforming the state enterprises has lately been recognised by many Chinese economists as an economic necessity. Now China's sense of its relative backwardness has been reinforced by its takeover of Hong Kong: slick, cosmopolitan and rich. China is keen to show itself in its best reforming light ahead of the meetings of the IMF and World Bank that take place in Hong Kong later this month. A display of boldness at his party's congress would bolster Mr Jiang for his first visit to Washington next month too. And it could help China's bid to join the World Trade Organisation.

But China needs greater boldness than Mr Jiang intends. The history of reform there has been that when the rulers give a liberal inch, the country strides a yard ahead. Even so, if the economy is to profit from its new opportunities, much more needs to happen. Deng's reforms have left China seething with personal and provincial jealousies that need to be carefully channelled and managed. Without properly enforceable contracts and secure property rights, neither Chinese nor foreign investors can make the best use of the resources and skills the country has to offer. Without greater decentralisation of decision-making and more checks and balances to the party's power, reform may be trapped in struggles for power at the top.

Where timidity is punished

Curbing the power of state and party is the essence of China's third revolution. For China's leaders, it is a dangerous prospect: the party must give way not just to new factory owners but to an independent judiciary and other disinterested arbiters of conflicting rights and claims. Ordinary people must be granted far greater control over their lives: where they live, how they work. Ultimately, that will renew demands for people to have a greater say in how they are governed.

That is not Mr Jiang's design in launching his new manifesto. He will deliberately have little to say about “political” reform, although the pressure to change is coming from official think-tanks, not just dissidents. Yet China's third revolution is already under way and the party is falling behind. It had its seeds in the rising expectations of Deng's China. It was set back by the party's panicky reaction to demands for greater democracy in Tiananmen Square. China has regrouped and moved on since then. Mr Jiang and his comrades know that if reform falters, and prosperity with it, they have nothing to fall back on to bolster their claim to power and to keep the lid on social tensions—nothing, that is, except bullets. Obliged to press on with reform in order to stay in power, they will have little choice but to cede that power, bit by bit. The trick will be to do it peacefully. That will be the true measure of the revolutionary Mr Jiang.